Operationalizing the Sustainable
Development Criteria:
issues and practicalities in Ecuador
Marcos Castro R.
CORDELIM – CDM Promotion Office
Third Regional Workshop of the UNEP/Risoe Centre Project CD4CDM
August 19-20, 2004
Santa Cruz de la Sierra, Bolivia
Challenges
 Two-fold objective of the CDM:
• assist Annex I parties in achieving compliance with their quantified emission
limitation and reduction commitments…
• …and assist non-Annex I parties (i.e. developing countries) in achieving
sustainable development.
 Host party’s prerogative to ‘confirm whether a CDM project activity assists it in
achieving sustainable development’
• DNA has a key role in securing local development benefits of CDM projects.
• SD assessment of CDM projects is an opportunity for DNA to evaluate key
linkages between national development goals and CDM project interventions
Challenges (2)
In addition:
 While current VER prices seem to grant cost-efficient emission reductions for Annex I
parties, contribution of projects to sustainable development is not yet assured.
• Demand preferences on financially sound business-as-usual projects
• Reduced interest for projects that have additional environmental and social benefits but
that need financial returns from carbon finance market to get implemented
 Trade-off between two core objectives of the CDM:
• Lax additionality requirements increase availability of cost-efficient emission reductions.
• On the other hand, carbon prices likely to rise if strict sustainability criteria were globally
applied in host parties.
• Absence of (internationally agreed) sustainability standards plus competition in the CDM
supply side is resulting in a trade-off for the cost-efficiency objective.
 Single non-Annex I parties have no direct incentives to implement strict sustainability
criteria?
 There is a role of DNAs (and of other local stakeholders) in order to reverse this
tendency.
• Develop market niche for ‘high quality’ CERs (particularly relevant for marginal suppliers such
as Ecuador)
• credibility of the CDM system & the host country
• fundamental elements of a national/regional marketing strategy
Project approval
procedure adopted
by the DNA
National institutional setting for the CDM
CDM National
Authority (DNA)
CDM Promotion Office
separate public-private entity
presided by
Ministry for Environment
Ministry for
Environment
Priority project
portfolio
Regulation
Strategic research
& studies
Promotion
Policy - making
Information
dissemination
Project assessment
& approval
National registry &
Project reporting
Capacity
building
Technical & commercial
assistance
Ecuadorian DNA
 The Ministry for Environment is Ecuador’s Designated National Authority for the
CDM (as per resolution of the National Climate Change Committee). The DNA
technical coordination has been assigned to the Ministry’s Climate Change Unit.
 The DNA adopted the ‘procedures for national approval of CDM project
proposals’ (emissions reduction projects), as per Ministerial Accord of April 2003.
• As well, it has adopted complementary procedures for (i) approval of smallscale CDM project proposals and for (ii) endorsement of CDM project ideas
(emissions reduction & carbon removal projects).
 Additional tools, including project submission guide (for project participants) and
project assessment guide (for DNA evaluators) are being prepared. Ongoing
internal discussion of draft versions.
 Policy note on ‘sector priorities for CDM project implementation’ has been drafted
and is also being discussed at the MoE (prior discussion & adoption by NCCC).
• Focus: power generation, waste management, transportation sector.
• Notwithstanding, it just encompasses cross-references to broad policy goals
established in existing frame of relevant laws and sector plans.
 Other ongoing activities ( see next workshop presentation)
Ecuadorian DNA: evaluation process
Project
presentation
Project Participants
DNA
Project submission
Preliminary Review
based on Project
Presentation Document
Relevant stakeholders
based on check list
4 days
Complete?
Agreement Note
based on standard format
Evaluation
process
Draft Report
based on AssessmentGuide
10 days
Clarifications?
Requests &
adjustments
Final Report
- Consultations institutions
- Stakeholder comments
based on AssessmentGuide
5 days
Approved?
National
Approval
Issuance of Letter
of National Approval
Approval criteria - overview
Project Document
Annex: nat’l requirements
Project participants
DNA
based on presentation guide
based on evaluation guide
(A)
Compliance with applicable
legal framework (sector/local
scope)
Applicable legal prerequisites
for proposed project activity.
Attachment of relevant
licenses, certificates, others.
Check on integrality &
consistency. Consultations
with relevant authorizing
entities.
(B)
Congruence with relevant
national/sector/local
development policies/plans
Explanation on how the
proposed project activity is
congruent with development
policies/strategies.
Assessment of evaluators:
individual briefing and joint
recommendation on
approval.
(C) Discussion of
environmental, socioeconomic
and technological impacts (w/o
further guidance)
Explanation on how positive
impacts will be achieved and
negative impacts mitigated.
Individual briefing and joint
recommendation on
approval.
Annex: int’l requirements
CDM Project Design
Document (PDD as defined
by the CDM-EB)
/
Submission of PDD that has
been or will be submitted for
validation by OE.
/
Review of PDD. Relevant
observations may require
joint revisions with
participants & validator.
Approval procedures: strengths
Some strengths:
 Consultation of interested stakeholders ensured:
Though specific procedures need to be tested and eventually adjusted.
 Cost-efficiency:
Project participants will incur in near zero costs when preparing the project for
national approval request. Though not established yet, the evaluation fee is
expected to be symbolic. Further on, monitoring of project performance in regards
to approval criteria is currently not requested.
 Time-efficiency:
The approval process is designed to be a streamlined process. The DNA is
committed itself to carry on the whole process in less than 20 working days (not
taken into account time for clarifications & adjustments by project participants).
Compare time frames in the international validation & registration stages.
 Submission of PDD is requested:
Project participants and DNA will benefit of dealing with a consolidated project
proposal. Experience has shown that project participants often request a LoA in
early stages of project development, when information is still weak and many key
(design and financial) questions still unsolved.
Approval procedures: weaknesses
Key weaknesses:
 Problematic definition of mandatory provisions (requirements A&B), i.a.:
• Not consistent with not-binding nature of sector plans/strategies.
• Requirement of EIA for all kind of projects.
 Lack of a consistent set of core SD goals, issues & criteria
• Information requirements are limited to ‘identify’ broad dimensions potentially
affected by project interventions.
 High degree of subjectivism:
• Open space for arbitrary interpretations by project participants and DNA
evaluators, due to loose description of information requirements and lack of
project presentation & project evaluation guidelines.
 No provisions for ensuring relative assessment of project-specific impacts
• Comparison of project scenario against a reference case (baseline
scenario/best practices) is not specified.
 Project performance in regards to ‘anticipated’ SD impacts is not addressed
• Review of project design (tasks/measures/strategies), beyond simple statements
on potential positive/negative impacts.
• Provisions for monitoring and ex-post evaluation.
Considerations for
improvement of
approval procedure
Underlying hierarchical framework
Core goal
CDM project contributes to SD
Dimensions of Sustainable Development
Social
Economic
Environ.
Institutional
….
Action side
Project development & implementation
Control side
Project evaluation & monitoring
Sustainability issues
Sustainability principles
Targets
Criteria
Strategies
Indicators (qual/quant)
Tasks
Verifiers
Guidelines
Norms / rules
Adjusted from [CEPE, 2003]
Overview: improving approval procedure
Key task
Description
Step
1
Review of national development
policies & strategies.
Step
2
Establishment
of
critical
sustainability principles and
criteria at project-level, based on
development goals & priorities.
Identification of core criteria for each dimension of
sustainable development. Selected criteria should reflect
national development priorities while being relevant for
project-level interventions.
Step
3
Improvement of assessment &
approval method,
taking into account (1) cleardefined critical SD criteria and
(2) current DNA approach based
on
requiring
qualitative
assessment
to
project
developers.
Subtasks include:
1.Development of guidance for qualitative assessment of
criteria, i.e. for adequate selection and assessment of
(qualitative) indicators by project developers.
2.Definition of thresholds for non-compliance of critical
criteria. Definition of verifiers & rules for project approval.
3.Revision of scope of DNA assessment. For instance,
incorporate provisions for ensuring monitoring of project
performance in regards to SD targets.
4.Incorporation of corresponding approval conditions.
Step
4
Adjustment of assessment tools,
addressing diverse needs for
application by project developers
and by evaluators.
Particularly, this would include:
Elaboration of project presentation guideline/format (for
project developers’ reporting on contribution to SD) and
project evaluation guideline/sheets (for DNA evaluators).
Development of sector-specific evaluation procedures &
tools. As well, simplified evaluation procedures & tools for
small-scale projects.
Process of establishing core SD criteria
Key considerations for improving assessment method
1. Determine comprehensive frame of sustainability issues, while providing flexibility for
suitable qualitative assessment by project participants
• Establishment of clearly defined set of core sustainability criteria
• Guidance for selection & assessment of key indicators/verifiers
2. Delimitation of spatial & temporal scope of sustainability assessment
• Adopt standard procedure for defining the system boundaries that underlies SD
evaluation of a particular project.
3. Ensure relative assessment of a project’s contribution to SD goals
• The project’s contribution to SD goals ( compliance of criteria) should be
assessed against a reference case. Determine the nature of such a reference
case (e.g. baseline scenario, business-as-usual) .
4. Clear-cut provisions for assessing project design & performance
• Assessment scope should go beyond identification of potential impacts, but
rather review if project design coherently targets achievement of SD benefits.
• Incorporate cost-efficient provisions for monitoring and ex-post evaluation of
project interventions (in regards to SD impacts).
5. Establish consistent & transparent decision rules!
• Might proof challenging, due to underlying qualitative assessment